Back
2025 Supreme(Online)(NCLAT) 455
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Indevar Pandey, M
Kewal Krishan Sharma – Appellant
Versus
U.V. Asset Reconstruction Company Ltd. – Respondent
Company Petition (IB) No.180/CHD/PB/2022
For the Appellants/Petitioners: Mr. Gaurav Mitra, Mr. Aalok Jagga, Mr. Nipun Gautam, APS Madaan, Mr. Sahil Lohan, Lavanya Pathak
For the Respondents:Mr. Krishnendu Datta, Sr. Advocate, Mr. Dhruv Dewan, Ms. Sanjukta Roy, Ms. Alina Merin Mathew
Defaults occurring before 25.03.2020 are actionable under the Insolvency and Bankruptcy Code. The cure period in contracts does not negate prior defaults or trigger recovery of pre-existing debts.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 and Section 10A - Appeal against NCLT's order admitting petition for CIRP initiation against Majestic Hotels Ltd. - Issue of default and applicability of Section 10A - Corporate Debtor contended non-default due to COVID-19 moratorium - NCLT observed that default arose from January 2020 and was unprotected by Section 10A - Adjudicating Authority's findings supported by borrower’s balance sheet and terms of MoU. (Paras 41, 46, 74)
(B) Definition of Default - Under Section 3(12) of IBC, default defines non-payment of debt when due - Automatic occurrence of default upon non-payment within contractual cure period highlighted. (Paras 41, 45)
(C) Implications of Cure Period - NCLT ruled that failure to comply with cure period results in termination of settlement agreement; hence defaults were actionable despite payments made after date of default. (Paras 53, 66)
(D) Court's ruling on Evidence - Adjudicating Authority's reliance on documents and balance sheets affirmed existence of debt and default, dismissing claims of incomplete evidence. (Paras 70, 72)
Facts of the case:
The appeal arises from NCLT admitting a petition for CIRP against Majestic Hotels Ltd. The Appellant contested that there was no default as payments had been made, and any stated default fell within the moratorium period retroactively established by Section 10A.
Findings of Court:
The tribunal ruled admission of the CIRP was valid, concluding that default occurred before the introduction of the 10A period and noted that the default was not cured despite subsequent payments.
Issues: Key legal question addressed was whether the default fell under the protection of Section 10A and whether the NCLT's conclusions about the existence of continuous default were appropriate.
Ratio Decidendi: The NCLT found the default claimed was prior to the effective date of Section 10A and maintained the argument regarding the automatic termination of the arrangement upon default was well founded.
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. admission of corporate insolvency petition. (Para 1 , 2) |
| 2. corporate debtor's financial default and restructuring. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 3. implications of defaults under mou and financial agreements. (Para 24 , 25 , 26 , 27 , 28) |
| 4. application of section 10a and interpretations. (Para 40 , 41 , 45 , 46 , 72) |
| 5. dismissal of appeal; confirmation of nclt order. (Para 74) |
JUDGMENT
(6th November, 2025)
INDEVAR PANDEY, MEMBER (T)
The present appeal has arisen from the impugned order dated 03.07.2024 passed by the National Company Law Tribunal, Chandigarh Bench (Adjudicating Authority), in Company Petition (IB) No.180/CHD/PB/2022. The Adjudicating Authority admitted the petition filed by U.V. Asset Reconstruction Company Limited/ Financial Creditor (FC) under Section 7 of the Insolvency and Bankruptcy Code, 2016 , (hereinafter referred to as ‘Code’) and initiated Corporate Insolvency Resolution Process (CIRP) against the Majestic Hotels Limited (Corporate Debtor) and appointed Mr. Navneet Gupta, as Interim Resolution Professional, who is Respondent No. 1 here.
2. Mr. Kewal Krishan Sharma, the Suspended Director of M/s Majestic Hotels Limited, and the Appellant here, has preferred this appeal challenging the said order primarily on the grounds, that there was no subsisting financial default; that the alleged default fell within the protection period of Section 10A of the Code introduced during the COVID-19 pandemic; and that the Adjudicating Authority failed to appreciate the continuous payments; restructuring arrangements; and contractual cure period agreed between the parties prior to the initiation of proceedings.
Facts of the Case
3. The brief facts of the case are as given below:
(i) The Corporate Debtor, M/s Majestic Hotels Limited, which is engaged in the hospitality business, had over the years availed multiple term loans from financial institutions for the purpose of constructing and running its hotel “Majestic Park Plaza” at Ludhiana. The first such facility was availed on 06.11.1991, when the Corporate Debtor entered into a loan agreement with Tourism Finance Corporation of India (TFCI) for Rs. 370 lakhs and with Industrial Finance Corporation of India (IFCI) for Rs. 300 lakhs to finance the hotel project.
(ii) Subsequently, on 20.08.1993, the Corporate Debtor obtained additional loans under a second agreement, Rs. 50 lakhs from TFCI and Rs. 45 lakhs from IFCI. Thereafter, under a third agreement dated 13.05.1994, the Debtor availed Rs. 150 lakhs each from TFCI and IFCI, and under a fourth agreement dated 26.08.1996, a further Rs. 320 lakhs each was borrowed from the said institutions to meet expansion and modernization costs.
(iii) Over time, the Corporate Debtor experienced financial strain and defaults in repayment. Consequently, IFCI classified the loan account as Non-Performing Asset (NPA) on 30.06.2012, followed by TFCI on 30.09.2012. IFCI issued a notice under Section 13(2) of the SARFAESI Act, 2002 on 17.08.2012, demanding recovery of Rs. 105,64,84,435/-, which was later followed by a possession notice under Section 13(4) on 02.11.2012.
(iv) Around the same period, Punjab National Bank (PNB), which had also extended financial assistance to the Corporate Debtor, challenged the actions of IFCI and TFCI before the DRT by filing S.A. No. 363 of 2014; it also issued a Section 13(2) notice dated 05.06.2014 for Rs. 3,91,48,110/-.
(v) On 30.08.2016, IFCI initiated recovery proceedings against the CD by filing O.A. No. 3267 of 2016 for Rs. 230.34 crores. This was followed by TFCI filing O.A. No. 715 of 2017 claiming Rs. 242.17 crores before the Debt Recovery Tribunal, Delhi.
(vi) Thereafter, on 12.12.2017, U.V. Asset Reconstruction Company Limited (UVARC), Respondent No. 2 herein, entered into two separate assignment deeds through which, it acquired the loans and underlying securities of both IFCI and TFCI. The purchase consideration paid by UVARC was Rs. 10.23 crores for TFCI’s loan and R
